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In: Accounting

Describe two ways in which the present value of a note receivable exchanged for Property, goods, and services might be determined?

Describe two ways in which the present value of a note receivable exchanged for Property, goods, and services might be determined? Explain in detail and cite the relevant paragraph

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Expert Solution

the present value of a note receivable exchanged for Property, goods, and services might be determined by two ways. they are as follows:

1. By making use of  established exchange price: In this, the present value of note receivable is determined by considering the cash sale price of property goods and services which are exchange with notes. if notes are openly traded in the market, then in that case market interest rate and make value of notes are used to determine present value.

2. By making use of imputed interest rate: when it is difficult to have established exchange price for notes, the present value of note is determined by approximating applicable interest rate. this process is generally called imputation and rate derived is called imputed interest rate. So this process is generally used when there is difficult to determine established exchange price and there is no ready market for note

ekkarill92 answered 2 years ago
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